COMMISSIONER OF INCOME TAX Vs. JANTA CENTRAL WHOLESALE

JUDGEMENT

(1.) AT the instance of the Revenue, the following question is referred by the Tribunal under s. 256 (1) of the IT Act, 1961 (`the Act') :--

(2.) THE assessee is a co-operative society and material assessment year is 1976-77. THE assessee claimed a deduction of an amount of Rs. 40,000 as purchase-bonus . THE bonus related to the purchases made during the period from 1st April, 1974 to 31st March, 1976. THE amount of bonus had been first provide on ad hoc basis of Rs. 40,000 without fixing the actual percentage. THE percentage was to be fixed on the basis of the applications to be received by 30th April, 1976. THE ITO disallowed the deduction, inter alia, on the ground that the liability was neither relating to the asst. yr. 1976-77 nor was it ascertained when provided for in the P&L a/c for the year under consideration, nor had any reasonable proportion to the profits earned by the assessee from the transactions. Taking an overall view, it was not treated as a business expenditure.

(3.) IN the statement of the case, it is stated that (i) in the meeting of the Board of Directors on 31st March, 1976 it was decided to give a total sum of Rs. 40,000 as bonus to the purchasers, (ii) public advertisement was inviting applications for bonus from the customers calling upon them to furnish details of the purchases made during the year, (iii) initially the bonus was fixed at 2 per cent on the annual purchases, and (iv) sums of Rs. 30,162 and Rs. 9,837 were paid as bonus in previous years 1976-77 and 1977-78, respectively.